Cyprus has great ambitions to become a regional hub for science and tech companies and has announced its full support for innovators, start-ups and forward thinkers. The growing interest and activity in this sphere have also spurred the country to make unprecedented moves to focus on this area of the economy, underlining the importance of Information and Communications Technology (ICT) as a catalyst to increase productivity and economic growth.

The value of the ICT services market in Cyprus is growing rapidly. In 2022, the ICT sector's total economic impact in Cyprus, which includes both direct and indirect contributions, was significant – reaching approximately €3 billion. This figure represents 13% of the country’s Gross Domestic Product (GDP), marking a healthy increase from 7% in 2019 and 8.5% in 2020. The growth continued its momentum also in 2023, proving the sector's significant impact and economic potential to drive the overall development of Cyprus.

EastMed HQ 

Several major international ICT companies have long operated regional headquarters in Cyprus, using the island as a hub for software development, system integration, testing services, R&D activities, project management, marketing and sales. Among these are NCR, a world leader in consumer transaction solutions, including ATM teller machines, and Amdocs, a leading multinational software and services provider to global communications and media companies. Others who have their global headquarters in Cyprus include Wargaming, a world-renowned video game developer, international VoIP IPBX software developer 3CX, and Viber, the popular online communications platform. Viber’s success in Cyprus is a good advertisement for the island as it seeks to attract more tech entrepreneurs. Viber was started in 2010 by a team of foreign executives who needed an EU base with favourable taxation, so they set up their headquarters in Limassol. Viber grew rapidly and in 2014 was bought by the Japanese e-commerce giant Rakuten for US$900 million.

International heavyweights such as Microsoft, SAP, Oracle and IBM have been present in Cyprus for many years, and the island has long been a prime location for the fintech industry as it is home to hundreds of the world’s biggest forex brokers and online-trading platforms. The number of fintech and regtech firms, such as Spotware Systems and Point Nine, is also growing and taking advantage of Cyprus as a gateway into and out of the EU for various corporate services.

2022 saw new big-hitters invest in Cyprus, with European digital banking platform Revolut becoming the first entity to receive approval as a crypto-asset service provider from the Cyprus regulator. The authorisation enabled Revolut to offer crypto services to its 17 million customers in the EEA out of a new crypto-asset hub in Cyprus. Revolut said its choice was down to the sophisticated regulatory regime of the country, which has already attracted the likes of Crypto.com, eToro and BitPanda. Also leading US consumer services and applications software provider, TangoMe, launched offices in Cyprus.

Other prominent players that have chosen Cyprus are TheSoul Publishing, one of the largest online publishers in the world with 1.5 billion followers. The company develops videos across 100 channel brands in 19 different languages, including some of the most-subscribed YouTube channels such as 5-Minute Crafts, Slick Slime Sam and Bright Side. Innovative software company BrainRocket is aiming to make Cyprus a central software hub in Europe, while global leader in trading and risk management for capital markets Murex is also bolstering its EMEA footprint from Cyprus. In addition, Medicover, a multinational specialised diagnostic and healthcare services provider has invested in Cypriot innovative biotech, while US business process outsourcing provider SYKES – now part of Sitel Group – has been expanding its operations in Cyprus over the last five years.

Fostering a Strong Cluster

Promoting a digital economy, developing more secure and efficient global communications and launching incentives are top priorities for Cyprus to attract more business and investment into its technology sector. In fact, one of the key drivers for the remarkable growth of the sector in recent years has been the government’s proactive approach in creating a business-friendly environment for these types of companies. Measures have included new policies to stimulate tech and innovation investment, and attractive incentives to both start-ups and established firms. The growing presence of global technology companies in Cyprus has further boosted its reputation as a preferred jurisdiction to set up operations. In turn, this surge of international investment has also brought in fresh financial resources and enhanced the level of global expertise and networks in Cyprus.

The sector is further supported by industry associations, of which currently the largest is Techisland. This non-profit organisation was formed in 2021, when more than 100 tech companies joined forces to showcase that Cyprus is an ideal place to live, work, and innovate. Its mission is to promote the acceleration of the local tech ecosystem and advocate for the resident ICT industry.

A significant reform was the official establishment of a Deputy Ministry for Research, Innovation and Digital Policy in 2020, to guide the country through its digital transformation and highlight Cyprus’ efforts to take bold steps to be a part of the ongoing Fourth Industrial Revolution (4IR), which is accelerating rapidly with the growing utilisation of new technologies such as artificial intelligence, cloud computing, robotics, 3D printing, the Internet of Things, and advanced wireless technologies. These developments have ushered in a new era of economic disruption, and Cyprus is ready to boost investment in this sector to secure its future as both an established international business centre and an emerging tech hub.

Focus on Long-Term Development

Cyprus is determined to diversify and harness growth with a technology-driven economy. The biggest spender by far on IT in Cyprus is the financial sector, followed by the telecoms providers and the public service. Support and training services form the largest primary market in Cyprus, followed by project and outsourcing services. There is currently big demand for support services and skills training in ICT, especially as communications are increasingly moving to 3rd Platform technologies, such as mobile, cloud and big data systems. Services and software are expected to be the top-performing segments of the Cypriot IT market in the coming years, due to continuing demand for quality end-to-end solutions that focus on enhanced user experience. Innovation and specialisation will be key elements to succeed in the Cypriot market.

For Cyprus to remain competitive largely depends on how it adapts to new realities like virtual banking, e-governance, agritech, new and renewable energies, as well as smart cities. Business success will depend on how new technological capabilities will be utilised and that digital infrastructure such as high-speed networks that are fundamental to the operations of tech companies are consistently upgraded.

Cyprus already has an extensive and internationally recognised pool of skilled professionals in financial and business services, but where this pool remains relatively shallow is in the tech sector – a gap the country urgently needs to bridge if it wants to develop its IT landscape. Being a relatively new sector, Cyprus has not yet had sufficient time to cultivate adequate numbers of local talent. Additionally, the country’s small size naturally limits the availability of homegrown tech experts. Education and retraining will be absolutely crucial to supporting the growing tech sector. Currently, Cyprus has the EU's lowest proportion of STEM (Science, Technology, Engineering, and Mathematics) graduates at 13.8%, highlighting the gap between the available local supply and labour market demands. Industry leaders note that Cyprus should ensure its education sector adopts a strong focus on STEM fields and entrepreneurship, and strengthens collaboration between industry, academia and government.

Given that the limited supply of tech talent is an issue throughout the EU, Cyprus also faces competition from other countries that offer very attractive packages for professionals to relocate with their families. Cyprus already provides many competitive advantages, but to address the needs of the sector the country has launched a new set of incentives geared to ramp up interest for companies to set up headquarters in the country. The plan has considered the best practices from other European countries, with emphasis on domains related to technology, shipping, innovation, research and development, biogenetics and biotechnology, without excluding any other companies that choose Cyprus as their place of business. However, tech executives say a comprehensive strategy is needed to attract and more importantly retain talent from abroad, while simultaneously upskilling and reskilling the local workforce.

Reforming the Education Sector

The education sector has been adapting to the reality of tech talent shortages introducing curricula to supply more skilled graduates to the labour market. The local universities now provide excellent bachelor and masters programmes in computer sciences and technology, consistently producing tech-savvy candidates to join the ranks of some of the world’s leading ICT companies. For example, the University of Nicosia (UNIC) broke new ground in university adoption of blockchain technology and offers the first certified online blockchain course (MOOC) and the world’s first master’s degree for digital currencies. More than 25,000 students have taken the MOOC and over 500 students have enrolled in the MSc in digital currencies.

Cyprus has also established several Digital Innovation Hubs (DIHs) such as the CYRIC Digital Innovation Hub, the KIOS Innovation Hub, the Robotics Control and Decision Systems (RCDS) Lab at the Cyprus University of Technology, and the Entrepreneurship Centre at the University of Cyprus. These DIHs are active in various market segments, such as agriculture, health, construction, transport, manufacturing and energy, and in a wide range of technological areas, including AI, Big Data, cloud computing and cybersecurity. The AI Expert Group considers the creation of a (virtual) AI DIH with dedicated AI research programmes that could serve as a platform where the scientific and business community could access and share knowledge.

In addition, the country’s investment promotion agency, Invest Cyprus, announced in 2018 a collaboration with Singapore-based blockchain platform VeChain and the American organisation CREAM, which provides advisory services for projects and investments in the blockchain area. The objective is to create a new framework of cooperation, recommend policy reforms and establish the necessary legal framework to regulate the application of blockchain technology in Cyprus’ financial sector. Another non-profit organisation supporting the research of blockchain technologies is called Cyprus Blockchain Technologies (CBT), which is a consortium including the University College London, the Bank of Cyprus and KPMG.

Embracing AI 

Cyprus has taken a firm stance in establishing Artificial Intelligence (AI) as a driving force for growth and increased productivity, and an opportunity to transform its economy. Considerable progress has already been achieved by developing blockchain technology and adopting a National Strategy for Decentralised Technologies. In January 2020, the Council of Ministers approved a new National Artificial Intelligence strategy with plans to establish applications to support the technological development of AI in domains such as universities, public and private sectors. The aim is to create an ethical and trustworthy foundation for AI development and to build an international cooperation network through Cyprus’ participation in EU initiatives. The strategy also serves as a tool to better engage with high-tech and start-up companies present on the island and to attract more players to help develop this segment.

Cyprus-based companies are already being noticed internationally in the AI sphere. For example, in its first outside investment fundraising, machine-learning company Omilia secured $20 million in funding from Grafton Capital to continue expanding its conversational AI technology built for customer care needs of global enterprises. The Cypriot company has built a virtual assistant and customer dialogue management system, where customers can experience human-level intelligence and machine-level efficiency when contacting a company, whether by phone, web chat, social media, SMS, email, or mobile app. The AI consists of proprietary speech-recognition software, voice biometrics, dialogue technology and machine learning, which the company claims has trained on billions of interactions since its founding in 2002. Now the service is fluent in 21 languages, serving clients such as global banks, mobile operators and insurance firms. The fresh capital will fuel go-to-market efforts in Western Europe and North America, where the company already has a lucrative customer base.

Supporting Start-Ups 

Attracting more innovation and talent is key to Cyprus’ efforts to secure a digital future, which is why the country introduced financial incentives for innovative SMEs and start-ups launching on the island. To entice more international talent from non-EU countries to launch innovative ventures in and from Cyprus, the Start-Up Visa scheme was set up in 2017. Currently, the government is trying to make it as easy as possible for people to come and work on the island, for instance by launching the Digital Nomad Visa.

The goal is to further boost entrepreneurship and create new jobs, promote innovation and research, and diversify the country’s business ecosystem. Approved applicants will initially get the right to live and work in Cyprus for at least a year, and if successful in launching their start-up and creating jobs, the visas can be extended indefinitely. So far, most interest has come from the Middle East, and given Cyprus’ proximity to the area it makes the island an attractive option for innovators from the region to stay close to home while working in a competitive and business-friendly environment with access to EU markets.

Attracting more tech pros to Cyprus will ultimately lead to cross-fertilisation among professionals and an increase in local start-ups. As the country’s tech eco-system grows, it will also bring venture capital through its SME Equity Fund – established by the Cypriot government in collaboration with the European Investment Fund (EIF). The fund with a total budget of almost €40 million aims to bridge the gap between innovation and entrepreneurship. It will be used in combination with other lenders, who will commit their own funds in combination with state money – without the expectation of any return. Distribution through banks will ensure that projects are vetted properly for viability before receiving funding.

Start-up accelerators like the Cyprus Business Angels Network (CYBAN), Cypriot Enterprise Link, Chrysalis Leap and Repower Cyprus have all boosted the environment, along with events such as Hack Cyprus Hackathons, the Clean Launchpad Competition, as well as Startup Weekend and Startup Live. Home-grown talent and a burgeoning tech landscape are launching inspirational success stories, and a new research centre on interactive media, smart systems and emerging technologies (RISE) was inaugurated in Nicosia in 2017. The project is a joint venture between the three public universities – University of Cyprus, Cyprus University of Technology, and the Open University of Cyprus – the Municipality of Nicosia, and two international partners, the German Max Planck Institute for Informatics and University College London.

As part of the new National AI Strategy, a vibrant start-up ecosystem will also be fostered through the development of an accelerator program to support the successful launch and survival of new AI business ventures. This program will provide expertise in developing AI solutions, and help firms access expert communities. Apart from creating opportunities to team up with other firms and research institutions and facilitating the access to flexible and effective financial funding, this programme will also provide dedicated support to testing and open data environments – including regulatory sandboxes.

A Future of Opportunity

The investment landscape for technology and innovation in Cyprus is both promising and dynamic, according to industry experts. Cyprus is now taking huge strides and is determined to succeed in developing the sector for both companies and the state to better capitalise on innovative ideas and products. The island is an ideal location for a various types of tech companies, but the market size and characteristics make it an attractive testing ground for pioneering technologies and business models – in particular for segments such as fintech, healthtech, proptech and cybersecurity where innovative approached can be tested and refined.

Additional benefits are Cyprus’ attractive tax and regulatory framework, its incentives and intellectual property regime, as well as its cost-effective business operating environment which lends itself well to strategically expand further into European and Middle Eastern markets. Also, thanks to its top-tier universities and research institutes providing increasing numbers of highly qualified staff and carrying out ground-breaking and technologically innovative projects, the country’s tech landscape is sure to see substantial growth in the coming years.

For more information, contact Cyprus' investment promotion agency, Invest Cyprus.

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March 2024